IN THIS ISSUE:
? Greetings from the Sausage Factory
? MSAs the Answer to “Accident of History”
? Humana, AMS Offer Consumer Driven Plans
? Consumer Driven Plans Last Chance to Prevent National Health Insurance
? Dayton Coalition Bypasses Consumers
? Employee Benefit News — Where’s the Crisis?
Greetings from the Sausage Factory
The old saw is if you like sausage or legislation, avoid watching either being made. A couple of weeks ago, we reported on HR 2351, sponsored by Ways and Means Chairman Bill Thomas (R-CA), which seemed a pretty straightforward revision of MSAs, and added a $500 FSA rollover. It allowed first dollar coverage of preventive services, lowered allowable deductibles to $1,000 and $2,000 for individuals and families, allowed 100% of the deductible to be contributed each year, allowed combined employer and employee contributions, and removed the limits on employer size and total enrollment. Simple, eh?
Not so fast. During mark-up in the Ways and Means Committee all kinds of strange things happened. A “substitute amendment” was offered which changed all of that. I was traveling all week, and when I got back it was (and still is) hard to sort out what happened. Although the legislative language is incomprehensible, it appears the substitute lowers the allowable deductibles to $500/$1,000 but allows individual “Health Savings Account” contributions of up to $2,000 and $4,000. That is, the contribution is no longer tied to the size of the deductible. People eligible to make these contributions would have to either have a “qualifying” insurance plan or be uninsured.
What particularly alarmed people last week was the addition of a means-testing provision. The substitute set an income limit of $45,000 for individuals and $65,000 for families, similar to the IRA contribution limits. At first it wasn’t clear what this limit applied to. Would HSAs be available only to people at these income levels? If so, how in the world would an employer be able to offer it as a benefit plan?
Digging deeper, it appears that the income limits apply only to the individual contribution to the HSAs, not to eligibility itself. Employers could go ahead and offer HSAs to the entire workforce, and contribute money to the HSA regardless of a worker’s income.
At this writing, we are told that the bill will go to the floor of the House this week, possibly as early as Wednesday, and the means testing provision has been dropped. We also understand that both the original MSA expansion and the HSA substitute will be in the bill when it goes to the floor. But the bill is still being worked on, so I wouldn’t place any bets.
The substitute created quite an uproar. Ways and Means was apparently deluged with complaints. The core idea isn’t bad – allow people to set up a Health Savings Account independently of their employer or of their underlying insurance coverage. In fact, I proposed precisely this in my Unified Health Account paper earlier this year. Apparently the income provisions were inserted to pacify the Joint Tax Committee’s estimate of the revenue loss. But there are ways to do that other than introducing a whole new idea for income testing. They might have reduced the allowable annual contribution to $1,000/$2,000 or $1,500/$3,000, for instance.
More importantly, the substitute was completely unexpected by the consumer health community. We were looking for a simple expansion of MSAs, and suddenly we have all these other things with next to no information about the whys and wherefores. Who was it that said, “What we have here is a failure to communicate?”
MSAs the Answer to “Accident of History”
Whatever they do on the Hill, the market continues to move in the direction of empowering consumers. The “Florida Times-Union” ran an editorial noting that employer involvement in health insurance is “an accident of history.” Consumers now pay, it says, only one dollar for every five dollars of the costs — “If people paid only one-fifth of the cost of steak at the supermarket, few would eat hamburger.” But ultimately people are paying the other four dollars as well, it is just “spread throughout the economy? and reflected in lower wages and higher prices everywhere.” The article predicts that rising costs will “spark new interest in medical savings accounts.”
Humana, AMS Offer Consumer Driven Plans
Writing in the “Green Bay Press-Gazette,” Richard Ryman describes the new consumer driven products being offered by Humana and American Medical Security, both of which are making use of HRAs, but also offering a wide range of choices for employees and using Web-based tools “to help enrollees decide which plan suits them best.” A benefits manager for Plexus, Inc., which is using Humana’s SmartSuite product, reports that 14% of their 3,200 employees signed up for the consumer driven plans in the first year. She says, “Teaming up with Humana is helping us to teach our employees about just basic things. The same drug at Shopko costs different than at Copps. Employees didn’t understand that before and they didn’t need to because they just paid a $4 co-pay.” Humana CEO Mike McCallister says, “Consumers are pretty smart. They are good at picking what’s good for them.”
Consumer Driven Plans Last Chance to Prevent National Health Insurance
Bill Brewer reports in the “Knoxville News-Sentinel” that insurers are “turning to consumers to rein in costs in what some observers say is a last chance at keeping health insurance out of the federal government’s hands.” The article is a report on a recent health care forum held in Knoxville. The chief medical officer of the Tennessee Blues, Dr. Steven Coulter, thinks physicians, insurers, employers and employees have to “work together to control costs.” He cites his son as an example of an uninformed consumer who “believes a visit to the doctor costs $10. He doesn’t see medical care as expensive and he doesn’t make judicious choices.” An actuary with Milliman USA, Doug Proebsting, reports that “62 percent of U.S. employers surveyed by Milliman said they plan to move toward consumerism this year or next?.” The article also notes that spending on health care is up by 675 percent in Tennessee over the last twenty years, compared to 450 percent nationally.
SOURCE: http://www.knoxnews.com/ This is another one of those pubs that charges to retrieve archives. The original article ran in the business section on June 15, 2003.
Dayton Coalition Bypasses Consumers
Writing in the “Dayton Daily News,” Kevin Lamb reports on a local coalition that is taking a different approach. The Tri-River Healthcare Plan has rejected consumerism in favor of improving quality. Hugh Becker, the HR vice president at Robbins & Meyers, thinks consumerism does nothing more than “shift costs from employer to employee.” He says consumer plans “expect too much of consumers who have never felt the need to comparison shop?.” Instead, Tri-River is working on physician behavior, “rewarding doctors for following best treatment protocols?.” It relies on a committee from the Greater Dayton Area Hospital Association to decide what protocols should be rewarded.
Employee Benefit News — Where’s the Crisis?
Finally, Richard Quinn denies there is any crisis in health care, in an article in “Employee Benefit News.” He says people have been talking in terms of a crisis for 30 years or more, but “the fact is that the vast majority of Americans obtain health care when needed and the majority is satisfied with the system.” He does blast employers for being “shortsighted and strategically ill-informed?.” He says, “Employers were happy to build the entitlement mentality when it suited their needs,” but now that times are tougher, they are willing to break their promises to their employees. He says doing that misses the importance of having a productive and loyal workforce, and will rebound on employers eventually.
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